Six Predictions for 2020 China Pharmaceutical & Health Care · 2020-05-09 · February, 2020 Six Predictions for 2020 China Pharmaceutical & Health Care

February, 2020

Six Predictions for 2020China Pharmaceutical & Health Care

Perspectives for Novel Coronavirus© 2020. For information, contact Deloitte China. 2Industry Predictions© 2020. For information, contact Deloitte China. 2

From a survey launched by Deloitte in response to the COVID – 19 outbreak among 104 leading pharmaceutical company executives in China …

Almost all respondents set out plans in facilitating daily business operation and employee health monitoring

Yet, ~40% of respondents still believe there’s an increasing uncertainty in meeting their 2020 FY targets

Q: How did your company respond to the crisis? [Multiple choices] Q: How do you foresee the crisis will impact on your business revenue in 2020?

Source: Deloitte survey N=104

21%

15%

20%6%

38%

Revenue will drop down in 2020 within 20%

Revenue will drop down in 2020 more than20%

Sales can catch up later to meet the target in2020

Sales will go up with the rising medicaldemand in 2020

Unknown

67%

84%

90%

65%

28%

Establish a crisis management team to allow a faster decision making

%

Adjust business performance target in 2020

Track health, location and travel data base for all employees

Implement flexible work arrangement for your employees

Set a business continuity & recovery plan


These uncertainties are primarily perceived to be driven by increasing challenges in sales & marketing and supply chain management

Q: Within your business priorities, what are the most difficult challenges to overcome during this crisis? (Please prioritize top 3)

Q: On what aspects does this crisis impact your enterprise most? (Please prioritize top 3)


14%

59%

45%

32%

51%

33%

Manufacture capability deployment

Supply chain management

Business channels model

Human resources allocation

Financing pressure from income, cash flow and cost

Customers retaining and growing

23%

37%

76%

30%

39%

43%

% %

Manufacturing capacities will be an issue to meet the sales target

Market fluctuation with changing demands

Marketing and sales activities can't resume due to the restriction

R&D activities can't resume, such as clinic trial

Employees remote working is less effective

Warehousing and Logistics can't deliver products to the market


To mitigate the impact, survey respondents believe that supply chain, digital channel and enhanced collaboration are priorities

How will your company do in short term to mitigate the impact to your business? (Please prioritize top 4)


TOP 3 plan to mitigate impact

38%

43%

39%

28%

42%

38%

50%

Implement new tech (web/mobile) to sustain client services

Strengthen supply chain management

Speed up digital transformation

Speed up new product launch

Invest more on online business

Optimize human resources

Strengthen collaboration with local government and hospitals


Anticipated short – term impact to pharmaceutical companies in China

R&D, Clinical trials management

E.g. Trial program suspended, potential delay to new product

launch timeline

Sales Visit & Marketing Promotion

Procurement & Manufacturing

E.g. Difficult or unable to engage target customers,

losing key accounts

E.g. Lack of raw materials as well as labor forces to resume production


We made six predictions on the industry involvement after the virus outbreak

Public / Government Healthcare Provider Pharmaco’sShort term

Long term

1 Accelerated healthcare system upgrade, with a more emphasized focus toward public healthcare resource optimization and disease prevention infrastructure setup

4 Increasing urge to review existing supply chain model for better visibility and efficiency

2 Increased adoption of healthcare technology, including healthcare big data for disease management, and AI-based tools to support clinical decisions

5 The need to further invest in digital capabilities for customer engagement

3 Increasing role and decision power of Center of Disease Control (CDC)

6 Potential tuning of portfolio & investment interest in -• Enhancing prevention care portfolio e.g. Dx kits, vaccines, AI based Dx services

and applications, etc.• Close ecosystem building to capture business opportunities from early Dx to

treatment follow up


Predictions – Further accelerated healthcare system upgrade

Key observation: The outbreak of COVID-19 has again exposed capacity and capability issues in the healthcare system, E.g. limited inpatient capacity of Class III hospitals, insufficient diagnose and treatment capability and infrastructure in CII and below hospitals, etc.

We predict that COVID-19 will be a key trigger to accelerated invest in primary care infrastructure

Public system will continue to improve … … with a particular focus in primary care

Future positioning

Class III

Class I & II

& unclassified

Community

Healthcare

Preserved resources for

Specialty and Critical Care

Care for rehabilitation and

common / chronical

diseases

The “Gate Keeper”

Early diagnosis and health

management

More

alliances

Guided Rx

flow

Current status

Number: 2.5K

No. of visit: 1335Mn1

No. of visit yoy: +7.4%

Number: 29.7K



Number: 94.6K2



Chronical patients from upper class hosp.

Follow up patients from specialty care in upper class

Future community healthcare center- A collaboration of both public and private resources

Disease screeningeRx and drug

delivery… …Health consult

Future Community Care Center

1

Note: 1. Accumulated number of visits from Jan. 2018 to Sep. 2018. 2. Includes community health center, township health center, clinics, and village clinics


Predictions – Increased adoption of technology in healthcare offerings

Key observation: • After the outbreak, the application of big data and epidemic prevention has gained more attention from the government level: The Meeting of the

Standing Committee of the Political Bureau of the CPC Central Committee on February 3rd stressed that "to promote the open sharing of relevant data and case information to accelerate the research on virus origin and transmission mechanism, improving prevention and control measures“

• As the "2019 Global Artificial Intelligence Health Summit" also suggested, "Ai + Medical Imaging" will become one of the most promising field in healthcare providers with potential for commercialization. E.g. In Shanghai, over 20 Class III hospitals have introduced AI assisted diagnosis and treatment research programs, with the goal to facilitate clinical pathway efficiency for patients

2

Public hospital reform – Focus from treatment to prevention

Prevention Diagnosis Treatment

E.g. Open source analytical platform forvirus gene sequencing

Vaccine development: Study of virus gene sequencing to support vaccine R&D - National Genomics Data Center released the COVID-19 resource library on Jan 22nd, integrating the research results of a number of global institutes on COVID-19, to assist the R&D of vaccine

E.g. AI enhanced imaging diagnosis

AI diagnosis of COVID-19 patients: a new set of AI diagnostic technology for COVID-19 was developed by Damo and Alibaba Cloud - The technology can accurately interpret CT image of suspected case in 20s with a 96% accuracy, which greatly improves diagnostic efficiency

E.g. AI embedded early drug R&D facilitation

Drug Screening and Development: Alibaba Cloud

and the Global Health Drug Discovery Institute

(GHDDI) is developing a big data and AI drug

development platform, using relevant preclinical

and clinical data to facilitate the calculation of

targets and molecular properties


Digital Technology & Big data application in public health management – "Health QR Code" for COVID – 19 control & monitoring

2

• Based on Alipay, use tricolor QR code (red/yellow/green) as a digital health certificate

• Quarantine measures will be determined by checking code

• Application scenarios: transportation hubs (airports, railway stations, highway toll stations); community and office building entrances, etc.

• On Feb. 11th, Hangzhou took the lead in the "Hangzhou Health QR Code" for COVID-19 prevention and control

• The code is in accordance with the requirements from a series of epidemic control regulation enacted by Zhejiang and Hangzhou govt. To facilitate the travel demand of the people and those who are waiting to enter Hangzhou, this digital tool is adopted to minimize the risk of serious outbreak when huge amount of people return to work/school from other cities

• Till Feb. 18th, over 100 cities have adopted this digital management tool, while nationwide launching

Introduction

• Self-Description: applicants conduct online declaration

• Database establishment and data crosscheck • Area/places screening• Dynamic real-time update: the code will

automatically change color if the applicant finishes required quarantine or updated declared info

How does it work

• Under the guidance of the E-Government Office of the General Office of the State Council, Alipayis accelerating the development of a unified national health code system

• The national code is expected to launch on Feb. 24th

Next Step

The technology can be used to create "National e-health code” to solve the data island problem among hospitals

Future Scenarios

Patients in any hospital can use the code to access their personal health data throughout the whole process of treatment

Doctors can quickly understand the patient's past cases, greatly improving the efficiency of the hospital visit

Help with stratified care, two-way referral, health management, online hospital visit, etc.

Ho

w t

o u

se

Login Alipay Choose region Self-Assessment Finish Application QR code Generated

No quarantine required

7-day Quarantine

14-day Quarantine


Predictions – Potential enhancing decision power of CDC’s in the future

Key observation:

3

《 Healthy China 2030 》Sets guiding principles of public health provider system design: “Higher emphasis on disease prevention … and allocate more resource in primary care"

The 12th meeting of the Central Committee for comprehensively deepening reform“Focus on improving institutional mechanism for disease prevention and control of major epidemic, improving national public health emergency management system”

Therefore we foresee that the role of CDC system will become increasingly important in the future …

Comparison of government budget for China CDC, China public hospital and that for US CDC

China CDCThe government’s funding to CDC in 2019 was ￥0.45bn, down by 14.9% YoY

compared to 2014

The government’s funding to public hospitals in 2019 was ￥5bn, up by 38.8% YoYcompared to 2014

US CDC has an annual budget of more than $12 billion, or nearly $40 per person

China Public hospital

Funding for CDC continues to decline and resources are comparably inadequate

US CDC

What to expect after COVID-19…

• Balance resource spending on prevention, diagnosis and treatment, increase funding for CDC

• Full empowerment of role of CDC• Optimize the talent structure and improve the

management system• Increase the efforts in public health education to

build the understanding of “prevention comes first"


Predictions – Increasing urge for companies’ to review existing supply chain gaps and improvement opportunity for efficiency

Key observation:

4

Pharma company engagement opportunities

Pharmaceutical Company

Distributor

Retail Pharmacy

Patient

Online Healthcare Services

HospitalGovernmental

Healthcare Entities1 2 3

4

4

Co-improve disease control & prevention

1

• Closer collaboration with public healthcare providers and research entities in disease epidemiology and drug screening and development

- Talents- Infrastructures- Funding

Form unified standard to improve efficiency

2

• Logistics integration: Multi-warehouse cooperation; supply chain integration via integration of information flow and logistics plans

• Operational mgmt.: Unified ERP system of key subsidiaries

Enhance influence on target customers

3

• Hospital services: Support further transformation of public healthcare provider reform

• B2B2C platforms: Enrich the distribution network through more B2B and B2C platforms

Explore new channels to engage end users

4

• O2O model by online and offline integration to provide value added purchase options and other pharmacy services for patients

Short-term angle: new channel / models to mitigate operating risks

Long-term angle: integrated supply chain model to facilitate business strategy & planning


Predictions – Further emerging of patient – centric engagement model 5

The virus outbreak significantly limits the physical interaction with healthcare providers – more adoption of patient centric engagement model will be further accelerated

Follow-up systemEnable better patient compliance

Patient education Reduce the communication cost between physician

and patients

Genetic testingEmpower physician with up-to-date diagnostic capability

Big data company Provide big-data platform to enhance the research capability

In-hospital PHIProvide in-hospital situational insurance

Consultation servicePathological consultation

Multi-disciplinary team(MDT)

Injection centerSolve the safety issues in drug injection

Patient-centric


Potential tuning of companies’ portfolio strategy – future promising investment areas within the industry

6

The outbreak of COVID-19 on the other hand exposes existing unmet needs in disease prevention, diagnosis and treatment, with increasing focus in regulatory approval reform, we foresee more investment in …

Prevention

Diagnosis

Treatment

Established process for vaccine R&D

Enhanced diagnostics tools and technology

Novel MoA and Indication Strategy

Examples

• Establish an efficient vaccine development process and conduct thorough research on known pathogens in order to respond quickly to outbreaks of infectious diseases::after the Outbreak of H1N1 flu in the United States, States, due to the fully established process of influenza virus vaccine development, H1N1 vaccines were approved by FDA within only 5 months; Sanofi has accelerated the development of COVID-19 vaccine using gene recombination technology and the candidate vaccine for SARS

• Develop diagnosis measures with higher sensitivity, response speed, and convenience, such as better POCT solution: continuously improving POCT technology from quality control, cost, flux, interconnection and other aspects - For contagious diseases, improve POCT’s sensitivity and convenience can avoid missing out on infected patients as well as explore the possibility of conducting at-home testing

• AI Diagnostic Technology and Platform: Tsinghua University Launched COVID-19 Intelligent Diagnostic System to improve diagnostic capability of primary hospitals

• Discover new anti-viral drug MoA: Example: capsid inhibitors (CAI), a new antiretroviral mechanisms, has successfully completed preclinical studies; a new implanted anti-HIV drug "islatravir" developed by Merck achieved good results in Phase I clinical trial

• Design efficient drug screening process and platform to shorten the response time of new pathogens: potential application includes using AI technology to improve the efficiency and speed of drug target screening as well as new indication of mature drugs, etc.


Key implications to pharmaceutical companies in China

How can we capture the emerging opportunities moving forward?

• Embrace accelerated adoption for future healthcare service and product delivery model

• Conduct supply chain integration and optimization

• Participate in disease prevention infrastructure building

• Explore opportunities in health big data and AI in disease prevention and treatment, public

health risk identification

• Partner with government entities for broad market healthcare professionals education

• Revisit in-market product strategy to capture potential opportunity immediately after virus

outbreak

• Revisit future portfolio to prioritize specific products or identify potential BD opportunities

Patient centricity

model and patient

activation

Co-construction of

new disease control &

prevention system

Revisiting pipeline

and in-market

portfolio


Contact

Jens EwertIndustry LeaderChina Life Sciences & Health Care +86 21 6141 [email protected]

Andrew YuConsulting LeaderChina Life Sciences & Health Care +86 21 2316 [email protected]

Key contacts Additional contacts

David XieConsulting DirectorChina Life Sciences & Health Care [email protected]

Linda PuProgram ManagerChina Life Sciences & Health Care [email protected]

Wang HuanResearch ManagerChina Life Sciences & Health Care [email protected]

Eric ChenConsulting ManagerChina Life Sciences & Health Care [email protected]

mailto:[email protected]






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Six Predictions for 2020 China Pharmaceutical & Health Care · 2020-05-09 · February, 2020 Six Predictions for 2020 China Pharmaceutical & Health Care